IGI Logo

A Niche player with a Global presence KEY CHANGES: TARGET …

Supriya Lifescience Ltd (SSL), incorporated on 26th March 2008, is one of the key Indian manufacturers and suppliers of active pharmaceuticals ingredients (API), focusing on research and development. As of October 31, 2021, SSL has niche product offerings of 38 APIs focused on diverse therapeutic segments such as antihistamine, analgesic, anaesthetic, vitamin, anti-asthmatic and antiallergic. SSL is the largest exporter of Chlorpheniramine Maleate and Ketamine Hydrochloride contributing to 45-50% and 60- 65%, respectively, of the API exports from India, between FY17 and FY21. Additionally, SSL is among the largest exporters of Salbutamol Sulphate in India contributing to 31% of the API exports from India in FY 2021 in volume terms (Source: CRISIL Report).

* The global pharmaceutical market grew at ~5% CAGR from ~USD 955 bn in CY14 to ~USD 1,270 bn in CY20 and is expected to sustain this growth over the next 5 years to reach USD 1,585-1,625 bn in CY25 led by technological advances, rise in aging population and sedentary lifestyles.

* Enjoys an extensive global presence with products exported to 86 countries to 1,296 customers as of Oct 2021. Exports contribute to ~77% of FY21 sales.

* Strong R&D capabilities and advanced manufacturing facility with reactor capacity of 547KL/day including 7 clean rooms. The capacity utilisation improved steadily from 52% in FY18 to 71% in FY21.

* SSL enjoys a global client base with long-standing relationships on the back of consistent product quality and reliability of supply. SSL filed 14 active DMFs with USFDA & 8 active CEPs with EDQM, for API products in therapeutic areas as of Oct 2021.

* Revenue grew healthy at a CAGR of ~18% over FY19-FY21 led by higher sales volumes, increase in selling prices and penetration in newer markets.

* EBITDA grew at a CAGR of ~61% while EBITDA margins improved significantly from 23% in FY19 to 43% in FY21 led by an increase in penetration towards regulated markets.

* PAT grew at a CAGR of ~77% over FY19-21 led by better operating performance and topline growth.

* SSL has a healthy balance sheet position with a D/E ratio of 0.2x as of H1FY22. Out of IPO proceeds ~Rs.60cr will be utilized for debt repayment which results in negligible debt status.

* At the upper price band of Rs.274, SSL is available at P/E of 16.7x (FY22E annualized) which appears to be reasonably priced compared to its peers. Hence, we assign a “Subscribe” rating for the issue on a short to long term basis considering its strong financial performance both topline and bottom-line, improving margins, export exposure, capacity expansions and increased penetration to regulated markets.

Purpose of IPO

The offer comprises of fresh issue and offer for sale, totaling to Rs. 700cr. The proceeds of the offer for sale (Rs.500cr) shall be received by the selling shareholders. The net proceeds of the fresh issue (Rs.200cr) will be utilized for funding working capital requirements (Rs. 93.3cr) of the company, repayment of borrowings (Rs.60cr) and general corporate purposes.

Key Risks

* Top 10 customers contribute ~47% to FY21 sales. Going ahead, as penetration to be more on regulated markets there will be a reduction in customer concentration.

* The industry is subject to regulatory changes.

* Competition from other Pharma API players.

To Read Complete Report & Disclaimer Click Here

For More Geojit Financial Services Ltd Disclaimer https://www.geojit.com/disclaimer 

SEBI Registration Number: INH200000345

Above views are of the author and not of the website kindly read disclaimer